US prices continue to march higher, triggering concerns among economists, policymakers and business leaders about the sustainability of the post-pandemic recovery.
What’s happening: The US Consumer Price Index, a key inflation gauge, jumped 0.9{2750b4cc7056d0bb9a2b86c9ddb203daca2fc0af7fca9cadc9b37f06819f4dcb} in June, the largest one-month increase in 13 years. Over the past 12 months, prices were up 5.4{2750b4cc7056d0bb9a2b86c9ddb203daca2fc0af7fca9cadc9b37f06819f4dcb}. Gas prices rose 45.1{2750b4cc7056d0bb9a2b86c9ddb203daca2fc0af7fca9cadc9b37f06819f4dcb} compared to a year earlier. Food prices were 2.4{2750b4cc7056d0bb9a2b86c9ddb203daca2fc0af7fca9cadc9b37f06819f4dcb} higher, while prices for dining out rallied 4.2{2750b4cc7056d0bb9a2b86c9ddb203daca2fc0af7fca9cadc9b37f06819f4dcb}. But even stripping out volatile food and energy prices, so-called “core CPI” rose 4.5{2750b4cc7056d0bb9a2b86c9ddb203daca2fc0af7fca9cadc9b37f06819f4dcb} — the largest 12-month increase in that closely-watched measure in 30 years.
Details, details: Used car prices have skyrocketed more than 45{2750b4cc7056d0bb9a2b86c9ddb203daca2fc0af7fca9cadc9b37f06819f4dcb} over the past 12 months. Meanwhile, airfare has increased almost 25{2750b4cc7056d0bb9a2b86c9ddb203daca2fc0af7fca9cadc9b37f06819f4dcb} and hotel and motel prices rose 15{2750b4cc7056d0bb9a2b86c9ddb203daca2fc0af7fca9cadc9b37f06819f4dcb} — though those prices are still below June 2019 levels. This data is hugely important, since out-of-control inflation could jeopardize the health of the economy as it snaps backs following Covid-19 shutdowns. Officials at the Federal Reserve maintain that the spike in inflation is temporary, but they’re watching the situation closely in case they need to roll back crisis-era support sooner than expected.
On the radar: Divisions are deepening over whether the Fed has become too complacent. On one side is team optimist. Gus Faucher, chief economist at PNC Financial, told my CNN Business colleague Chris Isidore that “underlying inflation remains under control,” and that comparisons to costs a year ago are making the situation appear worse than it actually is. He thinks this effect will “wash out of the data in the near term.” On the other side are the skeptics, whose ranks appear to be swelling.
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